Dispatches from a Small Business

It is Time To Reform the US Patent Office

The evidence is fairly clear that it is past time to reform the US Patent Office, particularly in its handling of software and Internet-related patents. One of my ex-employers, Mercata, managed to obtain several patents (including a few that were awarded postmortem) that in effect patented volume discounting (though the method was sortof kindof clever). Amazon famously managed to patent 1-click ordering, and numerous companies from Red Hat to Blackberry have been subject to expensive suits from various patent trolls, many of whom never took a single step to monetizing or developing their patents besides hiring lawyers.

Stephan Kinsella at Mises has another good example: Apple is attempting to patent the ordering of take-out food by cell phone.

Genius! Apple's done it! They've solved the problem of waiting in line for food or beverages. You place your order before you get it--but not the normal way--see, here's the pure genius of it--you place your order, get this, you won't believe it, wirelessly.
Yep! Who would have thunk it? I mean, I know it's well known to call in
a food order and drive there in time to get it, so you don't have to
wait in line (and this might be done on a (wireless) cordless home
phone, or a (wireless) cell phone, but I digress); or to place your
order and receive one of those little blinky-buzzy things that tells
you when your order is ready, so you don't have to wait in line (hey,
aren't those little blinky wireless buzzers, er, wireless? but again, I
digress); and it's known to communicate wirelessly; and in other
countries, it's well-known to use cell phones to make purchases. And in
McDonald's, you can place your order at a little automated computer
kiosk (but maybe it uses wires! Whew--HUGE difference, lemme tellya).

But, my God, Apple! Oh, it's amazing--the innovative brilliance to think of using a cell phone--a cell phone,
do you hear me!?--to place an order for a cuppajoe... so you don't have
to stand in line... it's so beautiful, I'm about to shed tears...
Sniff... Thank God for the US patent system giving them a king's
monopoly on this unique idea. Otherwise, no one would have come up with
this!. And let's only hope Apple gets a patent on this and is able to
sue or threaten other companies to pay them royalties for all their
remotely similar "wireless communications systems". After all, it's a small price to pay to have the American innovation we do.

There was a time when I was naive enough to think that the US Patent Office would step back and say -- "oops, we screwed up. We really didn't know what we were doing when we were flooded with all of these business-model-masquerading-as-software patents. Now we realize we need to get our act together." Congress is going to have to step in and reduce or eliminate the patentability of software and business models (all other software other than computer code is subject copyright law, not patents).

But of course, Congress will never make these reforms, because forcing business competition into the courts under arbitrary and changing law rather than settling business model superiority in the marketplace generates far more political activism and campaign donations. So why am I even bothering writing this. Never mind.

Postscript: By the way, if I were running a software or Internet company, I would be filing every dumb patent application I could think of, because if I don't, someone else will and will and then I am stuck with a suit and trying to prove priority. Which causes me to think of one way we might force reform -- a sort of reverse strike. Every software company in 2008 should strive to file as many patent applications for every BS thing they can think of. Maybe a deluged PTO might at that point force some kind of reform.

Comments

I know you don't like those Free Software Commies, but the Open Source world has come up with a not-terrible solution to the problem: Patent Commons. On the face of it, it's a workable idea.

http://www.openinventionnetwork.com/

http://www.patent-commons.org/

Basically, bunches of businesses pool their patents, then if one of the patents is accused of infringing, they can counterthreaten with the rest of the portfolio. So in essence it's Patent-Mutual-Assured-Destruction.

Nobody likes living under the threat of MAD, but it got us through the Cold War, which is something.

Posted by: Micah | Jan 2, 2008 12:53:34 PM

"Every software company in 2008 should strive to file as many patent applications for every BS thing they can think of."

Wow! You should file a patent on THAT idea.

But what makes you think this has not already been going on for YEARS?

Uh, Kinsella got this wrong. Apple was not granted a patent on this. This is just an application. Applications always start out with the most expansive claims possible--it's the beginning of a negotiation. All of the claims in this patent will be rejected as a first step. At the end of the negotiation, Apple will likely be left with some very restrictive primary claim. If they end up with anything. Something like 60 percent of applications don't result in any patent, even after all the negotiating.

I used to work in patent law. I'm not saying the system couldn't benefit from some reform (and some is coming), but you need to find real examples. Most of the "horror stories" I've heard had been just as flawed as this one. Don't worry, you won't have to pay Apple a fee for wireless orders.

The PTO released some big rule changes on how patents are acquired--and were promptly taken to court by GlaxoSmithKline. Long story, but GSK says that the PTO exceed their rulemaking authority (i.e., made rules that contradict statutes passed by Congress).

The biggest player in favor of the new rules: Microsoft and now Intel.

Congress (both sides) have been working reform issues. The big $$$ lobbyists pushing for it all paid for by Microsoft and friends. Capture? hmmmm.....

I hear you about patent trolls, but what does one look like? Suppose Bob is a brilliant inventor. In his basement, he invents a miraculous new widget and patents it.

But he doesn’t own factories, so he wants to license his patent. The next thing you know, Bob is spending more time shopping his patent around and chasing after infringers (remember, it is up to the patentee to enforce his patent).

What if Bob contracts with an auction house to sell his patent to the highest bidder? The auction house, specializing in getting buyers for patents does just that. The highest bidder is a patent licensing organization, which specializes in finding very valuable technology and licensing it to Big Companies. Meanwhile, Bob is back in his basement dreaming up the Next Great Invention. Everyone, from Bob to Big Company Licensee, has engaged in a voluntary transaction and come out richer, right?

Big Company A (let’s call them Microsoft for short) decides they don’t want to pay $1/copy of Vista/XP, etc. to the licensing company. So just implement it without taking a license. The licensing company sues to enforce the patent, wins $150M ($1 for each copy of Vista/XP sold).

Suddenly, the licensing company is called a troll on Slashdot. Hey, they never invented anything, they don’t practice the patent, etc. The term “useful idiots” was coined by some old dead commie, but I think it applies to the Slashdot folks when they sing Microsoft’s song.

I’m not sayin’ there aren’t trolls out there. I’m just sayin’ you can’t have a rule that tells you a troll from a productive member of society.

I’m also not saying that the patent system can’t use a beat of tweakin’. But remember this, around 500,000 applications are filed each year. To ask the patent office to spend just 10 hours more on each one is 5M man-hours. At 2000 man-hours per year, that’s a lot of people that need to be hired. Around ½ of all issued patents go abandoned after issue for failure to pay the fees (i.e., they aren’t even worth a few bucks to have as trophy-like wall hangings and in press releases).

OTOH, only a couple thousand patents get litigated each year. Around $2M on average is spent by each side trying to, among other things, invalidate or defend the validity of that patent (that some patent atty. wrote up for $10k and some examiner spent 18 hours, on average, evaluating).

It seems to me that the best place to tweak the patent system is on the litigation side. The patents that are most valuable are self-selected for you....and cheaper litigation = more challenges = the more of the most important bad patents get invalidated at court.

Posted by: Anon E. Mouse | Jan 2, 2008 7:04:59 PM

I don't have links for this, because I read it in a trade journal (EDN, perhaps) several years ago, but the explanation there for our patent problems was the change in rules when Congress required the Patent Office to become self-supporting or a profit center.

It contained a quote from the then-director of the office to the effect that it was a change in emphasis; the "customer" of the patent office was now the applicant, rather than the American public, so the goal of the patent process was to grant the patents, and let litigation sort out which ones were valid. After all, they no longer had funding to let them spend appropriate time on determining validity themselves.

If the boy cries wolf 3 times, but no wolf is there when the villagers come running, does that prove that there are no wolves?

There are many bad patents in software, no question. But there are good ones also.

Posted by: Bearster | Jan 3, 2008 10:11:20 AM

Microsoft supports software patents, and Congress listens to people in an industry when it decides how to handle them. I am not sure why Microsoft wants software patents, because patents seem more a threat to them than a help. Small competitors can patent algorithms Microsoft uses and thus leverage out a lot of money from Microsoft. In the other direction, I don't know how often Microsoft successfully sues someone for infringing their own patents. I would guess it is not an important part of their profitability. Nonetheless, Microsoft keeps pushing for software patents, and so software patents we get.

For the public interest, I believe we would be better off scrapping software patents entirely. Bearster, I know very few software patents that plausibly fit the model where patents help, i.e. that are both difficult to develop (>1 man-year) and un-profitable to develop without the patent. I'm thinking of MPEG and of RSA encryption, and in both of those cases I am only confident of the "significant effort" prong, not the "profitability" prong. Can you tell us what good patents you are thinking of?

I second Anon E mouse about patent trolls, by the way. Patent trolling companies are providing a valuable service within our current law. Most individuals do not have the time or training to enforce a patent themselves. If you have a brilliant idea, you don't want to hold the patent as an individual. You want to either start a big business out of it, or sell the patent to an existing big business. In short, focus on silly patents, not on the companies that enforce them.

Back in the good old days when the Big and Little LEO satellite constellations were going to revolutionize commercial space operations, one of them (I think it was TRW's Odyssey, but I could be wrong) actually succeeded in getting a patent on a (IIRC)12,000 mile orbit. How in the hell can you patent an orbit? It's like patenting the numbers from 20 to 75, or patenting sunrise in the east.

Posted by: Former Naval Person | Jan 3, 2008 6:01:04 PM

Back in the good old days when the Big and Little LEO satellite constellations were going to revolutionize commercial space operations, one of them (I think it was TRW's Odyssey, but I could be wrong) actually succeeded in getting a patent on a (IIRC)12,000 mile orbit. How in the hell can you patent an orbit? It's like patenting the numbers from 20 to 75, or patenting sunrise in the east.